The Commission adopted changes to its rules governing Letters of Credit (LOCs). The adopted rules provide administrative relief and lessen financial burdens on providers receiving certain types of high-cost support from the Universal Service Fund. Eligible telecommunications carriers are required to obtain and maintain a LOC from a qualified institution to receive high-cost support.
Previously, few banks met the strict qualification criteria, which among other criteria required that the bank maintain a Weiss bank safety rating of B- or better, raising concerns of increased costs for providers. Under the adopted rules, well-capitalized U.S. banks that may not meet the previous Weiss bank safety rating requirement can issue LOCs, broadening the pool of eligible financial institutions. This rule change benefits participants in the Connect America Fund Phase II, the Rural Digital Opportunity Fund, the 5G Fund, the Bringing Puerto Rico Together Fund, and the Connect USVI Fund by allowing such participants to lower the value of their LOCs after reaching specific deployment milestones. The Commission expects that these rule changes will facilitate faster broadband deployment by freeing up more capital.
